Non-linearities in mark-up on costs

Wlazlowski, Szymon and Binner, Jane and Giulietti, Monica and Joseph, Nathan (2006): Non-linearities in mark-up on costs. Published in: Aston Working Papers No. 2006 (2006): pp. 1-21.

Abstract

Abstract This study employs an error-correction SETAR model to analyse the non-linearities in the behaviour of the mark-up on costs charged by the filling stations in the New York metropolitan area. While usual price transmission gained significant attention in the literature, the mark-up portion of the price has not been analysed to date. The results indicate that the adjustment to mark-ups to their long run values is non-linear, but the speeds with they adjust to their long-run values are equal across regimes for two out of three series analysed. For one of the series the adjustment is beneficial for the end consumers such that prices fall faster than they rise. The findings are somewhat surprising, indicating that there is no need for government intervention in the NY petroleum market.

• Item Type: MPRA Paper
• Institution: Aston Business School
• Language: English
• Keywords: Rockets and feathers; asymmetry; petroleum; SETAR
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q40 - General; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection

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